US power grid infrastructure facing fundamental constraints threatening data center expansion; electrical capacity limitations now blocking facility deployment.

The largest US power grid operator is warning that data centers may face involuntary outages under a plan to prevent widespread blackouts and shield residential ratepayers from electricity price spikes.

PJM Interconnection LLC announced that digital warehouses unable to secure sufficient dedicated power generation may be temporarily disconnected from the grid during peak-demand periods as early as mid-2027. According to the operator's letter to stakeholders, affected data center operators could receive compensation for the disruption and associated costs.

The announcement reflects mounting pressure on PJM and other grid operators as they confront aging infrastructure and the surging power demands driven by artificial intelligence. "The present trajectory of rapid load growth, tightening supply and rising capacity costs is not sustainable," Paula Conboy, chair of PJM's board of managers, wrote in the letter. She added that "existing consumers should not bear higher capacity costs caused by new Large Loads that do not bring, or otherwise contract for, the new supply necessary to serve them."

PJM plans to issue curtailment warnings before grid conditions reach emergency levels. The operator, which manages Northern Virginia's Data Center Alley, has faced months of intense scrutiny from governors, utilities, consumer-rights groups, and the White House, prompting calls for structural reforms or even a network breakup.

To address a projected shortfall, PJM scheduled an emergency auction for September to procure power generation for the year beginning in June 2028. An earlier auction this month failed to attract adequate supply. The costs of this Reliability Backstop Procurement will be charged to data centers. Simultaneously, PJM will facilitate a bilateral matching process connecting data centers with power generators.

PJM forecasts that data center demand will rise approximately 70 gigawatts by 2038. Earlier this month, grid demand surged to 168 gigawatts—breaking a two-decade record—driven by extreme heat and new AI facilities. Since 2022, the region has experienced retirements of roughly 15 gigawatts of generation capacity, further straining resource adequacy. As the board stated in its letter: "This unprecedented growth in demand, combined with the retirement of approximately 15 GW of generation in the PJM footprint since 2022, has placed increasing pressure on the region's resource adequacy position. The Board believes this reliability threat requires decisive action."

In January, President Trump and a bipartisan coalition of governors proposed a framework directing PJM to conduct a one-time electricity auction where technology companies would effectively finance new power plants through 15-year contract bids. Additionally, PJM will establish a new registry to track data centers and their power requirements, enhancing accuracy in future demand projections.